Facts of the Case

This is a writ petition before the Telangana High Court challenging an Order-in-Original confirming a service tax demand under the erstwhile Finance Act, 1994. This is a Service Tax matter for the period 2015-16 to 2017-18 (up to June 2017) — squarely a pre-GST liability period — and does not raise any GST question, though the demand was confirmed with reference to Section 174 of the CGST Act, 2017 (the savings/transitional provision preserving pre-GST liabilities).

The petitioner, M/s Shubhankar Facility Managers Private Limited, challenged the Order-in-Original No. 38/2021-22-Adjn.(ADC)-ST dated 31.01.2022 (received by e-mail on 08.02.2022), passed by the Additional Commissioner, Ranga Reddy GST Commissionerate, confirming a demand of Rs. 63,96,598/- under Section 73(2) of the Finance Act, 1994 read with Section 174 of the CGST Act, 2017, along with interest and penalty. The petitioner contended that neither the show cause notices dated 02.12.2021, 17.12.2021 and 13.01.2022 (as referred to in the impugned order) nor any notice of personal hearing had actually been served upon it before the order was passed.

Issues Involved

  1. Whether the Order-in-Original confirming the service tax demand could be sustained when the Department was unable to establish that the show cause notices and notice of personal hearing had been served on the petitioner.
  2. Whether the order was liable to be set aside for violation of the principles of natural justice.

Petitioner's Arguments

  • Neither the show cause notice issued prior to the impugned order, nor any notice of personal hearing, was ever served upon the petitioner.
  • The order-in-original was consequently arbitrary, contrary to law and evidence, and in violation of the principles of natural justice, warranting that it be declared null and void and set aside.
  • Also sought condonation of a 305-day delay in filing the writ petition, attributing it to certain earlier proceedings and administrative circumstances.

Respondent's Arguments

  • When specifically called upon by the Court to obtain instructions on whether the show cause notice and hearing notice had been served on the petitioner, learned counsel for the Department fairly conceded that Respondent No. 1 had no proof of such service.

Court Order / Findings

  • The Court reiterated its settled position that mere issuance of a show cause notice and hearing notice is not sufficient — actual service on the taxable person must be established and reflected in the order-in-original itself.
  • Finding that the impugned order made no mention of service of notice upon the petitioner, and that the Department had conceded it had no proof of service, the Court set aside the Order-in-Original dated 31.01.2022 and remanded the matter to the Additional Commissioner.
  • As a practical measure, the Court directed that the set-aside order itself be treated as the show cause notice, with the petitioner required to file its reply within three weeks, after which the Additional Commissioner was to pass a fresh, reasoned order in accordance with law, including affording an opportunity of personal hearing. If no reply was filed, the authority was free to pass such order as deemed fit.
  • The writ petition was allowed on this procedural ground; the Court did not examine the merits of the underlying service tax demand for 2015-16 to 2017-18.

Important Clarification

This order turns purely on a breach of natural justice — the Department's inability to prove service of the show cause and hearing notices — and results in a remand for fresh adjudication rather than a final ruling on the petitioner's service tax liability. It concerns the pre-GST service tax regime for tax periods up to June 2017; it does not decide any question of GST law, the reference to Section 174 of the CGST Act being only the transitional mechanism for continuing pre-GST recoveries.

Sections Involved

  • Section 73(2), Finance Act, 1994 — Recovery of service tax not levied or paid
  • Section 174, Central Goods and Services Tax Act, 2017 — Repeal and saving of earlier tax liabilities
  • Article 226, Constitution of India — Writ jurisdiction

Decision – In Favour of Petitioner (Assessee)

The Telangana High Court allowed the writ petition, set aside the service tax Order-in-Original for want of proof of service of notice, and remanded the matter for fresh adjudication after due opportunity of hearing — without deciding the demand on merits.

Case Details

  • Court: High Court for the State of Telangana at Hyderabad
  • Case No.: Writ Petition No. 10948 of 2023
  • Coram: Hon'ble the Chief Justice Ujjal Bhuyan and Hon'ble Sri Justice N. Tukaramji
  • Date of Order: 11 July 2023

Link to Download the Order

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